Microsoft refines search for Yahoo deal

Microsoft sign in Herndon, Va., and Yahoo sign in Sunnyvale, Calif.

TEXT OF STORY

KAI RYSSDAL: Here's what we know for sure about the new Microsoft overture to Yahoo. All Microsoft will say is that it would be a "transaction" that falls short of an outright aquisition. Yahoo says it's open to talking about a transaction. So what do you suppose it could be? Something about search, probably. Advertising, almost definitely. Starring Google as the evil empire is a good bet. So, since we're just throwing around ideas here, why don't we have Marketplace's Jeff Tyler consider some of the possible permutations.


JEFF TYLER: Microsoft looks to be after Yahoo's search business and a minority stake in the company. That would give Microsoft a bigger piece of the $20 billion online advertising market. The move could also be defensive. Yahoo has been talking to Google about a deal where Yahoo would display search ads sold by Google.

Gary Arlen is a tech industry analyst.

Gary Arlen: One of the opportunities is for Microsoft to acquire the pieces it needs to really go head-to-head with Google. And, more importantly, keep Google away from Yahoo.

Billionaire Carl Icahn may help keep Google away from Yahoo. As a big shareholder, Icahn has been pushing Yahoo to reconsider Microsoft's merger offer. But even if Microsoft and Yahoo do combine forces, it may not be enough to slow Google.

BOB MONROE: It rarely turns out that if you take a couple of also-rans and put them together, that you beat the champion.

That's Bob Monroe, associate professor of computer science at Carnegie Mellon University. He thinks a Yahoo-Microsoft partnership would flop if it's only purpose is to challenge Google at what it does best --- search-related advertising. But Monroe sees huge potential in developing the next generation of ads, on sites like YouTube and MySpace.

Monroe: Instead, if they could find a way to target video ads -- the way Google currently does targeted keyword advertising, to actually insert different ads for different viewers -- that's where I think there's a really interesting opportunity. But nobody's really figured out how to do that right yet.

Monroe doubts a Yahoo-Microsoft combination will pose a strong threat to Google. He expects new competition will come from a start-up company nobody's heard of yet.

I'm Jeff Tyler for Marketplace.

About the author

Jeff Tyler is a reporter for Marketplace’s Los Angeles bureau, where he reports on issues related to immigration and Latin America.

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